By Collins Nweze
The Group of Seven (G7) countries has approved $650 billion loan to the International Monetary Fund (IMF) to end COVID-19 pandemic.
IMF Managing Director Kristalina Georgieva broke the news on the fresh capital injection yesterday at the conclusion of her virtual participation in the G7 Leaders’ Summit.
She explained that the G7 support of additional $650 billion allocation of the IMF’s Special Drawing Rights (SDRs) – the largest issuance in history — will help boost global reserves while providing space for necessary fiscal expenditures to exit the pandemic and enable more sustainable recoveries.
The G7 is an inter-governmental political forum consisting of Canada, France, Germany, Italy, Japan, the United Kingdom (UK) and the United States (U.S.).
Since 1973, it has served as a formal, high-profile venue for discussing and coordinating solutions to major global issues on trade, security, economics, and climate change.
Kristalina said the Fund will be channeling SDRs and/or budget loans to reach a total global ambition of $100 billion for the most vulnerable countries.
She said: “This was a consequential Summit. The renewed spirit of international cooperation was palpable, with the G7 stepping up its efforts to help the world exit this crisis. I can assure you that the IMF is playing its part.”
Kristalina added: “I would like to thank Prime Minister Boris Johnson and the UK authorities for setting up a forward-looking agenda for the G7 summit, focusing on the most pressing challenges facing the world today.
“The IMF has been warning about dangerously diverging recoveries – and most recent data confirm that this trend not only continues, but deepens.
“Together with the World Bank, the WHO, and the WTO, IMF staff recently proposed a $50 billion plan to end the pandemic by vaccinating at least 40 per cent of people in every country by the end of this year and 60 per cent by mid-2022.
“The most urgent part of the plan is to redirect excess vaccine doses from advanced economies to the developing world. I welcome the G7’s commitment of one billion doses in the next year – it will make a material difference in the fight against the pandemic.
“Next, it is important to ensure that vials turn into actual shots in the arm and that production capacity is increased to protect against downside risks.”
Kristalina explained that from the start, The IMF emphasized the crucial importance of grants and, by its assessment, about one-third of the needed $35 billion in grant financing has now been secured from public and private sources.
“This is encouraging, but the work must continue to raise the rest—and to ensure transparent and well-coordinated implementation. The war is not yet won. This is why together with the World Bank, WHO, WTO and other institutions, we are forming a ‘war room’ — a task force to monitor and accelerate the implementation of this plan.”
She called for building a better future by boosting productivity and growth, resolve debt overhangs, and strengthen economic policy frameworks.
Policymakers, she said, will face difficult choices when gradually withdrawing policy support and proper targeting will be critical to support vulnerable people and viable firms.
“As policymakers cope with these post-pandemic challenges, they will need to boost revenues to finance investment in better public goods for their citizens.
“In this respect, I was heartened by the G7’s looking forward to reach agreement on a global minimum corporate tax at the July meeting of G20 finance ministers and central bank governors.”